Year-round: How 2021 fared for automobile in Pakistan?

How the year 2021 has fared for the automobile sector in Pakistan can be gauged by the changes in policies over its course and the variation in the sales.

Car sales started out slow as the calendar year unwrapped owing to the pandemic-led global industrial slump and the spiral in the prices that followed — as the local assemblers slowed down their churning out of the units.

Auto analyst Muqeet Naeem from said the uptick was quick soon after the fiscal budget 2021-22 wherein the government earmarked special measures for the those willing to get their cars.

In order to help the industry out of roiled waters, halfway CY2021, the government announced in its fiscal budget some relaxation to encourage buyers and to allay the spiraling-price dilemma.

The government thus slashed 2.5 per cent FED on the registration of a new vehicle in three different categories i.e. cars less than 1000cc, cars between 1000- to 2000cc and those above this engine power.

The relaxation was further aided by slashing the sales tax on the registration of an automobile under 1000cc slab thus making car purchase cheaper for middle-income-class of the country.

Another was a step to help assemblers produce less pricey units of CKDs and SKDs by cutting the additional customs duty (ACD) on automobile parts of under 1000cc cars from 17 pc to 12.5 pc.

Following this step, the prices saw a radical drop and people indeed rushed to buy (and to finance since monetary policy rate were hovering at 7 pc) new cars. So much so that later the central bank had to introduce some tightening of terms to stabilize the burden on import bill.

Arif Habib Limited’s senior research analyst Arsalan Hanif said the sales were still high even after central bank’s new policy changes because it might take months before the effects are reflected on market.

People had already booked their cars well before the commencement of this amendment, but new bookings now will have to bear with two-pronged dilemma, that is, increased prices due to dollar surge and inflation in metal products, Hanif said.

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The rosy period soon diminished with freight crisis surge, as soon as the global economy picked up, and also since dollar appreciated to historic highs and speedily, making auto-assembling costlier.

‘OWN’ MONEY

Well, the ‘own’ money practice is just as much there after the measures suggested by the federal ministers as it was before, say auto industry men.

Some vehicles demand as high as Rs1 million if being bought from auto dealers who usually invest in the bookings and wait till their vehicles arrive so that can keep a premium as their profits (illegitimate but prevalent) and sell off.

NEXT YEAR

The analysts suggest next year for the auto-sector will still yield higher than expected sales as the “macro-economic numbers are increasing” and people are reaping benefits from lenient duties at the moment.

If the dollar depreciates against rupee and other global crises are reined in, we can have “unprecedented growth in the sector on the back of many factors”, among which one is the entry of new players as well.